EMCOR Group, Inc. Reports First Quarter 2014 Results

EMCOR Group, Inc. Reports First Quarter 2014 Results
- Revenues Increase 2.0% to $1.60 Billion for First Quarter -
- Record First Quarter Diluted Earnings Per Share of $0.61 -
- Company Updates 2014 Guidance -
Business Wire
NORWALK, Conn. -- April 29, 2014
EMCOR Group, Inc. (NYSE:EME) today reported results for the first quarter
ended March 31, 2014.
For the first quarter of 2014, net income attributable to EMCOR was $41.3
million, or $0.61 per diluted share, compared to net income of $30.2 million,
or $0.44 per diluted share, in the first quarter of 2013. Excluding one-time
charges discussed below, non-GAAP net income increased by 27.1% to $43.4
million, or $0.64 per diluted share, compared to non-GAAP net income of $34.2
million, or $0.50 per diluted share, in the first quarter of 2013. Revenues in
the first quarter of 2014 totaled $1.60 billion, compared to revenues of $1.57
billion in the year ago period.
Operating income for the first quarter of 2014 was $69.4 million, or 4.3% of
revenues, which included UK operating losses and expenses aggregating
approximately $2.8 million (including UK restructuring expenses of $0.7
million) relating to the Company's decision to withdraw from the UK
construction market. Excluding these losses and expense items, the Company's
non-GAAP operating income for the first quarter of 2014 increased by 27.7% to
$72.1 million, or 4.5% of revenues, compared to non-GAAP operating income in
the 2013 first quarter of $56.5 million, or 3.7% of revenues.
Please see the attached tables for a reconciliation of non-GAAP operating
income, non-GAAP net income and non-GAAP diluted earnings per share to the
comparable GAAP figures.
Selling, general and administrative expenses for the 2014 first quarter were
$144.9 million, or 9.1% of revenues, compared to $138.5 million, or 8.8% of
revenues, in the year ago period.
The Company's income tax rate in the 2014 first quarter was 38.2%, compared to
an income tax rate of 38.7% in the year ago period.
Backlog as of March 31, 2014 was $3.37 billion, a decrease of 1.3% from $3.42
billion at the end of the 2013 first quarter as a consequence of a $65 million
backlog decline in the UK segment relating to the Company’s decision to
withdraw from the UK construction market. U.S. backlog grew by $19 million
which included backlog growth in the U.S. Construction and U.S. Industrial
Services segments offset by expected declines in the U.S. Building Services
segment due to 2013 portfolio reshaping. Backlog growth in the commercial,
transportation, healthcare and water/wastewater sectors was offset by declines
in the institutional, industrial and hospitality/gaming sectors. Total backlog
of $3.37 billion as of March 31, 2014 increased by 0.4% from $3.36 billion as
of December 31, 2013.
Tony Guzzi, President and Chief Executive Officer of EMCOR Group commented,
“Our first quarter performance reflected healthy margins across each of our
business segments due to strong performance in a still choppy economy. We
generated the strongest earnings per share for a first quarter in our history,
thanks in part to the 2013 addition of RepconStrickland that contributed
during the quarter.”
Mr. Guzzi added, “We achieved strong first quarter results in our U.S.
Electrical Construction segment and improved performance in our U.S.
Mechanical Construction segment. Additionally, we had a strong quarter in our
U.S. Building Services segment, which was driven by our site-based and mobile
mechanical services operations. Our U.S. Industrial Services segment performed
solidly in the quarter despite comparison to its outstanding 2013 first
quarter.”
Mr. Guzzi concluded, “While growth in non-residential construction has been
sluggish so far this year, our solid and expanding domestic backlog is a
positive indicator that we are gaining traction. We continue to manage through
the challenges in our government business associated with sequestration.
Supported by rigorous cost discipline, a solid and liquid balance sheet,
strong backlog and consistent operational execution, we remain well-positioned
to deliver on our growth objectives for 2014.”
The Company stated that, based on the current size and mix of its backlog and
assuming the continuation of current market conditions, it continues to expect
2014 revenues to be approximately $6.8 billion. Also, the Company now expects
diluted earnings per share to be between $2.45 to $2.70, up from its previous
announced guidance of between $2.40 to $2.70, excluding restructuring and
other costs associated with the withdrawal from the UK construction market.
EMCOR Group, Inc. is a Fortune 500 worldwide leader in mechanical and
electrical construction services, energy infrastructure and facilities
services. This press release and other press releases may be viewed at the
Company's Web site at www.emcorgroup.com.
EMCOR Group's first quarter conference call will be available live via
internet broadcast today, Tuesday, April 29, at 10:30 AM Eastern Daylight
Time. You can access the live call through the Home Page of the Company's Web
site at www.emcorgroup.com.
This release may contain certain forward-looking statements within the meaning
of the Private Securities Reform Act of 1995. Any such comments are based upon
information available to EMCOR management and its perception thereof, as of
this date, and EMCOR assumes no obligation to update any such forward-looking
statements. These forward-looking statements may include statements regarding
market opportunities, market share growth, gross profit, backlog mix, projects
with varying profit margins, and selling, general and administrative expenses.
These forward-looking statements involve risks and uncertainties that could
cause actual results to differ materially from the forward-looking statements.
Accordingly these statements are no guarantee of future performance. Such risk
and uncertainties include, but are not limited to, adverse effects of general
economic conditions, changes in the political environment, changes in the
specific markets for EMCOR's services, adverse business conditions,
availability of adequate levels of surety bonding, increased competition,
unfavorable labor productivity and mix of business. Certain of the risks and
factors associated with EMCOR's business are also discussed in the Company's
2013 Form 10-K and in other reports filed from time to time with the
Securities and Exchange Commission. All these risks and factors should be
taken into account in evaluating any forward-looking statements.
EMCOR GROUP, INC.
FINANCIAL HIGHLIGHTS
(In thousands, except share and per share information)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended
March 31,
2014 2013
Revenues $ 1,599,385 $ 1,568,401
Cost of sales 1,384,174 1,377,263
Gross profit 215,211 191,138
Selling, general and administrative 144,928 138,510
expenses
Restructuring expenses 909 1,363
Operating income 69,374 51,265
Interest expense (2,248 ) (1,862 )
Interest income 234 357
Income before income taxes 67,360 49,760
Income tax provision 25,518 19,042
Net income including noncontrolling 41,842 30,718
interests
Less: Net income attributable to (581 ) (551 )
noncontrolling interests
Net income attributable to EMCOR Group, $ 41,261 $ 30,167
Inc.
Basic earnings per common share $ 0.61 $ 0.45
Diluted earnings per common share $ 0.61 $ 0.44
Weighted average shares of common stock
outstanding:
Basic 67,188,577 67,110,334
Diluted 68,001,205 68,099,121
Dividends declared per common share $ 0.08 $ —
EMCOR GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2014 2013
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 406,668 $ 439,813
Accounts receivable, net 1,251,473 1,268,226
Costs and estimated earnings in excess of 105,008 90,727
billings on uncompleted contracts
Inventories 50,332 52,123
Prepaid expenses and other 67,699 79,216
Total current assets 1,881,180 1,930,105
Investments, notes and other long-term 6,567 6,799
receivables
Property, plant & equipment, net 122,456 123,414
Goodwill 834,102 834,825
Identifiable intangible assets, net 531,994 541,497
Other assets 31,217 29,275
Total assets $ 3,407,516 $ 3,465,915
LIABILITIES AND EQUITY
Current liabilities:
Borrowings under revolving credit facility $ — $ —
Current maturities of long-term debt and 19,227 19,332
capital lease obligations
Accounts payable 426,799 487,738
Billings in excess of costs and estimated 371,877 381,295
earnings on uncompleted contracts
Accrued payroll and benefits 199,887 237,779
Other accrued expenses and liabilities 184,624 172,599
Total current liabilities 1,202,414 1,298,743
Borrowings under revolving credit facility — —
Long-term debt and capital lease obligations 330,639 335,331
Other long-term obligations 347,949 352,215
Total liabilities 1,881,002 1,986,289
Equity:
Total EMCOR Group, Inc. stockholders’ equity 1,513,472 1,466,265
Noncontrolling interests 13,042 13,361
Total equity 1,526,514 1,479,626
Total liabilities and equity $ 3,407,516 $ 3,465,915
EMCOR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2014 and 2013
(In thousands) (Unaudited)
2014 2013
Cash flows - operating activities:
Net income including noncontrolling interests $ 41,842 $ 30,718
Depreciation and amortization 8,867 8,155
Amortization of identifiable intangible assets 9,504 6,336
Deferred income taxes 4,513 3,487
Loss on sale of subsidiary 596 —
Excess tax benefits from share-based (4,869 ) (418 )
compensation
Equity loss (income) from unconsolidated 460 (59 )
entities
Other non-cash items 1,038 1,779
Distributions from unconsolidated entities 72 600
Changes in operating assets and liabilities, (86,339 ) (145,700 )
excluding the effect of businesses acquired
Net cash used in operating activities (24,316 ) (95,102 )
Cash flows - investing activities:
Proceeds from sale of subsidiary 1,121 —
Proceeds from sale of property, plant and 931 549
equipment
Purchase of property, plant and equipment (8,073 ) (7,005 )
Investments in and advances to unconsolidated (300 ) —
entities and joint ventures
Net cash used in investing activities (6,321 ) (6,456 )
Cash flows - financing activities:
Repayments of long-term debt (4,377 ) (2 )
Repayments of capital lease obligations (491 ) (390 )
Dividends paid to stockholders (5,353 ) —
Proceeds from exercise of stock options 3,974 1,714
Payments to satisfy minimum tax withholding (1,481 ) (927 )
Issuance of common stock under employee stock 866 671
purchase plan
Payments for contingent consideration — (537 )
arrangements
Distributions to noncontrolling interests (900 ) (1,050 )
Excess tax benefits from share-based 4,869 418
compensation
Net cash used in financing activities (2,893 ) (103 )
Effect of exchange rate changes on cash and 385 (4,540 )
cash equivalents
Decrease in cash and cash equivalents (33,145 ) (106,201 )
Cash and cash equivalents at beginning of year 439,813 605,303
Cash and cash equivalents at end of period $ 406,668 $ 499,102
EMCOR GROUP, INC.
SEGMENT INFORMATION
(In thousands) (Unaudited)
For the three months ended
March 31,
2014 2013
Revenues from unrelated entities:
United States electrical construction and $ 308,136 $ 307,584
facilities services
United States mechanical construction and 513,011 541,117
facilities services
United States building services 448,044 455,156
United States industrial services 231,958 145,544
Total United States operations 1,501,149 1,449,401
United Kingdom construction and facilities 98,236 119,000
services
Total worldwide operations $ 1,599,385 $ 1,568,401
For the three months ended
March 31,
2014 2013
Operating income (loss):
United States electrical construction and $ 21,655 $ 18,940
facilities services
United States mechanical construction and 19,106 11,140
facilities services
United States building services 20,298 12,880
United States industrial services 23,394 22,747
Total United States operations 84,453 65,707
United Kingdom construction and facilities 1,297 1,279
services
Corporate administration (15,467 ) (14,358 )
Restructuring expenses (909 ) (1,363 )
Total worldwide operations 69,374 51,265
Other corporate items:
Interest expense (2,248 ) (1,862 )
Interest income 234 357
Income before income taxes $ 67,360 $ 49,760
EMCOR GROUP, INC.
RECONCILIATION OF 2014 AND 2013 OPERATING INCOME
(In thousands) (Unaudited)
In our press release, we provide actual 2014 and 2013 first quarter March 31,
2014 and 2013 operating income. The following table provides a reconciliation
between 2014 and 2013 operating income based on non-GAAP measures to the most
direct comparable GAAP measures.
For the three months ended
March 31,
2014 2013
GAAP operating income $ 69,374 $ 51,265
EMCOR UK construction operating losses 2,065 3,887
EMCOR UK restructuring expenses 685 1,325
Non-GAAP operating income, excluding UK losses $ 72,124 $ 56,477
and UK restructuring expenses
EMCOR GROUP, INC.
RECONCILIATION OF 2014 AND 2013 NET INCOME
(In thousands) (Unaudited)
In our press release, we provide actual 2014 and 2013 first quarter March 31,
2014 and 2013 net income attributable to EMCOR Group, Inc. The following table
provides a reconciliation between 2014 and 2013 net income attributable to
EMCOR Group, Inc. based on non-GAAP measures to the most direct comparable
GAAP measures.
For the three months ended
March 31,
2014 2013
GAAP net income attributable to EMCOR Group, $ 41,261 $ 30,167
Inc.
EMCOR UK construction losses ^(1) 1,621 2,983
EMCOR UK restructuring expenses ^(2) 537 1,017
Non-GAAP net income attributable to EMCOR
Group, Inc., excluding UK losses and UK $ 43,419 $ 34,167
restructuring expenses
(1)Amount is net of tax effect of $0.4 million in the 2014 quarter and $0.9
million in the 2013 quarter.
(2)Amount is net of tax effect of $0.1 million in the 2014 quarter and $0.3
million in the 2013 quarter.
EMCOR GROUP, INC.
RECONCILIATION OF 2014 AND 2013 DILUTED EARNINGS PER SHARE FIGURES
(Unaudited)
In our press release, we provide actual 2014 and 2013 first quarter March 31,
2014 and 2013 diluted earnings per share. The following table provides a
reconciliation between 2014 and 2013 EPS based on non-GAAP measures to the
most direct comparable GAAP measures.
For the three months ended
March 31,
2014 2013
GAAP diluted earnings per common share $ 0.61 $ 0.44
EMCOR UK construction losses ^(1) 0.02 0.04
EMCOR UK restructuring expenses ^(2) 0.01 0.01
Non-GAAP diluted earnings per common share,
excluding UK losses and UK restructuring $ 0.64 $ 0.50
expenses
(1)Amount is net of tax effect of $0.4 million in the 2014 quarter and $0.9
million in the 2013 quarter.
(2)Amount is net of tax effect of $0.1 million in the 2014 quarter and $0.3
million in the 2013 quarter.
Contact:
EMCOR Group, Inc.
R. Kevin Matz, 203-849-7938
Executive Vice President
Shared Services
or
FTI Consulting, Inc.
Investors:
Nathan Elwell / Matt Steinberg
212-850-5600
or
LAK Public Relations, Inc.
Media:
Lisa Linden / Mollie Fullington
212-575-4545 / 917-346-6123